Ofgem plans could cut £45 from annual energy bills

Plans unveiled by energy regulator Ofgem could cut £45 a year from energy bills across the country.

The strategy involves capping the amount of money suppliers can pay their investors, reducing borrowing costs and a range of measures already announced to reform the way the network charges are passed on to consumers.

Rate of returns

Ofgem wants to reduced the rate of returns to investors to 4%, roughly half of what they receive now which it believes will save £30 per customer per year. The other £15 will be rrecovered by the changes to network charges.

The watchdog said its plans for revising the energy system would reap benefits from new technologies like electric vehicles and renewables.

Reducing

Jonathan Brearley of Ofgem said: “In essence, we are basically reducing the amount of money firms can earn for transporting electricity and gas to your home.

“People in the future may well want to charge their electric cars and install solar panels on their houses and communities may even want to build their own wind farms. What we need is a system that supports this at least possible cost.

Long term interests

“Our job is to look after the long-term interests of consumers and strike a fair deal between their shareholders and those consumers.

“For example, if we have a system where the way we could connect electric cars is more flexible – that allows us to move demand, that means we have to build fewer wires, which means a lower investment overall.

“This will mean driving a harder bargain with network companies to ensure that households who need it always have access to safe and secure energy at a fair price.”

Criticism

The proposals have attracted criticism from the National Grid whjo supply the infrastructure to feed energy to people’s homes.

A spokesman said: “We are disappointed with the proposed financial package as we do not believe it appropriately reflects the level of risk borne by transmission networks.

“In order to deliver the major capital programme required across our networks in a rapidly changing energy market, we need to ensure the regulatory framework also provides fair returns to shareholders and enables us to continue to deliver world class networks for consumers.”
But Citizens Advice chief executive Gillian Guy said: “Energy network companies have had it too good for too long.

“Ofgem’s commitment to a tougher price control should curb the excess profits networks have been allowed to make. This is good news for people as this should result in lower bills.”